Market - - Jan 16,2017
Indian government considers further stiffening of foreign investments in the tobacco sector, posing a significant threat to the market share owned by Philip Morris International.
The American global cigarette and tobacco company has already written letters to the trade minister and a dominant government think-tank. Philip Morris said, the protectionist" and "discriminatory" propositions would slam a blow to its plans to launch fresh products and frame further investments in India.
Martin G. King, Philip Morris' Asia president wrote to NITI Aayog, India's most influential government think-tank that, “The proposed ban will impact our future investments in India and also force a review of our overall operations”. The concerned organization has a solid say in federal policies, including matters related to foreign investments.
In 2010, India banned foreign tobacco investment in the sector centered to cigarette manufacturing, but it still permitted tobacco companies to invest through licensing agreements and technology collaboration. Moreover, investments could also be built by creating a trading company.
However, since the previous year, the government has been considering to curb these, in order to shield public health interests.
According to a Philip Morris spokesman, the firm had "nothing further to add" in context to the company's view on foreign investment.
The major decisions on the rules, established by recommendations from various ministries, would be managed by Prime Minister Narendra Modi's cabinet.
After the 2010 ban on cigarette manufacturing investments, Philip Morris developed a new wholesale trading company with the help of Godfrey and an investment firm.
As per the current arrangement, Marlboros are manufactured by Godfrey while the trading firm by Philip Morris helps promote them.
However, if the new rules are imposed, Philip Morris' future investment ideas in India would land in jeopardy, since any form of new collaboration or investment would be banned.